How to Create a Business Case for ERP That Will be Approved!

Demonstrating to key decision-makers in your organisation the benefit of an industry-specific Enterprise Resource Planning (ERP) solution is not always easy.

It is not just a case of identifying the need and mapping out the steps involved in an ERP implementation project. You will need to present an indisputable business case for your new ERP solution which includes focusing on the benefits to the business AND the true cost of the problems the business is currently experiencing.

This article will be addressing the tangible (monetary) and intangible (personal impact, reputation, future opportunities) costs involved and what you need to do to highlight the importance of being proactive in addressing the issues in your business, instead of perpetuating the status quo.

If you can clearly define these costs and what they mean, long-term to the organisation, you will be well on your way to creating (and presenting) a business case for ERP that will be approved!

The first step in this process is to quantify those processes or issues within your business that are creating a financial pain point and attaching a cost to them. These are called tangible costs and once identified can then be translated into costs per year and estimated over a longer period to work out a return on investment if the decision was made to make a change.

The following are examples of problematic processes that can create a financial strain within a business:

1.????Job operations that are not scheduled in a way that ensures capital equipment and hardware are optimised to be used most effectively can lead to expensive machinery sitting idle, while other machines are working beyond their capacity and struggling to meet demand.

2.????Carrying too much inventory or having inadequate inventory control can result in over-ordering, tying up valuable capital, needing more warehouse space, and potential wastage.

3.????Poor control over your running costs is a critical error in operations. If you want to run a sustainable business, that delivers quality outcomes and hit your financial goals, operational efficiency is imperative.

4.????Inadequate capturing of all the costs in a project or contract, an inefficient approach to billing for variations leading to missed claiming opportunities.

5.????A lack of communication between areas in the business or a lack of visibility within critical relationships. A disconnection between departments results in lost time, potential delivery delays on a given project, and sometimes financial penalties.?In a business with multiple live projects, these issues are compounded exponentially.

Financial, or tangible costs such as those listed above, are easily identified, but people will often only address the symptom and try to fix it. Forgetting that the issue will have an underlying, deeper cause (that may only be identified with a process called root cause analysis) that must be remedied for the problem not to manifest and appear again.

Intangible costs are a little harder to quantify but may be more relatable expenditures to those within the business that are making the decision to move forward with the ERP implementation project.

Costs that are defined as intangible (any cost that is difficult to quantify), if not considered when making important business decisions may lead to long-term financial losses and brand damage that are hard to recover from.

Some good examples of intangible costs that should be highlighted when creating a case for an ERP system are shown in the below graphic.?

What are the next steps?

You have calculated your tangible costs, and identified your intangible costs but what do you do next?

To present your case for an ERP implementation project, you will need to next calculate your return on investment if you DO proceed with removing the root cause of your organisation’s problems which can then be compared to the return on investment if you DON’T remove the issues.

If this is worked out for 1 year, 5 years, and 10 years (minus the investment cost of the ERP solution) a clear picture of cost savings can be developed, or, an indisputable business case that your key decision-makers will have no choice but to approve!

Easy right? A LinkedIn article that breaks down the steps in under 1000 words absolutely makes it seem straightforward, however, this process can be tricky to navigate on your own. If you would like to discover a little more about the costs involved with purchasing an ERP system, you can check out our previous article on this topic here:?

If you would like to speak to an experienced ERP specialist that can help identify the root cause of your business’s problems, assist with calculating the costs of those problems and contribute to you developing a ‘hard-to-say-no-to’ business case then we can help with that as well!

It starts with a 15-minute phone call to set up a meeting and for us to learn more about your business, book a time in our calendar by clicking on this link!?